The Problem with Music Taxes: Where Does the Money Go, and How Much?

I’ll never fully understand technology bloggers when it comes to music policy. Here’s an obviously stupid idea: Warner Brothers, the label, comes up with a scheme to add a surcharge to ISP bills to allow, supposedly, “legal” use of music file sharing services. Stupid, yes.

Here’s the response from Michael Arrington (Techcrunch): “It’s clearly good for the music labels, who are facing their imminent extinction.” He claims that this is the plan the “labels” (actually one label) don’t want you to know (except that they’re sitting down for long interviews with Conde Nast Portfolio).

Apparently, “imminent extinction” means multi-billion dollar industry. (In fairness, the industry often — inexplicably — argues the same thing. I wish I were part of an “extinct” multi-billion dollar industry.) And apparently you can’t even talk about the issue of how music will be distributed and paid for without focusing on the desire of said industry to destroy your life and the fact that it’s still completely doomed.

And we’ve already seen Arringtonisms like recordings are worth nothing, and musicians should really owe websites cash for promotion (the Web 2.0 Payola plan, evidently).

But what happened to the obviously stupid idea? I agree with these sites that the plan is bad — I just think, ironically, it’s bad for even more reasons than they think. I’m not actually sure anyone read the original source — I think they were too busy being enraged, or looking for appropriate kitty pictures:

Forget about artists. Forget about copyright holders. Screw the musicians. This is ridiculously stupid even for the labels, partly because they’re unlikely to agree on the idea — meaning the idea is extinct on arrival. “Freeze innovation”? I guess — if the labels actually pursue this. But the blogosphere has become so rabidly anti-label, it’s fighting them instead of pointing out the planet-sized holes in the logic we’re being fed:

Griffin is freaked out by pay-what-you-will sales schemes. Despite the fact that Nine Inch Nails and Radiohead just had enormous success with voluntary payment schemes — and despite the fact that part of that scheme was charging an unprecedented high price for physical media (the opposite of what everyone has been telling you), Warner’s hired gun is afraid music will become a “tip jar.” Translation: the major labels don’t want artists selling direct to their customers. Ironically, he talks about peer-to-peer services, when that’s not the point. Obviously they want you tipping them, not tipping artists who’ve dumped their contracts.

They don’t seem to know where the money is going. Griffin specifically doesn’t want government involvement. Bloggers like to call this a tax. But that’s the problem — it’s a tax for whichever labels are involved, and not the labels that aren’t.

The plan is vague — and three years off. Again, if you read the article: “Bronfman has asked Griffin, formerly Geffen Music’s digital chief, to develop a model that would create a pool of money from user fees to be distributed to artists and copyright holders. Warner has given Griffin a three-year contract to form a new organization to spearhead the plan.” Wait, three years? One label managing the process? A pool — of what? For whom? And that means —

It’s likely to cause more infighting. That distinction between “artists” and “copyright holders” isn’t just semantic — organizations like ASCAP and BMI collect performance fees that go to publishers and writers, not artists, meaning this whole thing could start a fight between various forms of copyright and different collection agencies. These are the same parties who couldn’t agree about Internet radio; how will they agree about a blanket fee on all Internet use, one that would apply a water utility model to music?

No one will know what the money represents. I’ve personally spent a lot more than US$5 this month on music. And I’ve consumed quite a lot, too, via radio and Shoutcast streams — some of which are legally licensed, some of which aren’t. Now, instead, all that usage represents $5. How do you know what I downloaded? Or listened to? Or how I’m any different from someone else with $5? How is this more money for labels if I’m spending less?

Oh, yeah, and the story itself is misleading. Take this quote: “Compact disc sales are plummeting as online music downloads skyrocket.” Read that, and you’d assume CD sales are being replaced by music piracy. In fact, online music purchases are skyrocketing.

Or this one: “[the recording industry] has shrunk to a $10 billion business from $15 billion in almost a decade.” That leaves out explosive growth in the 90s that made the business $15 billion in the first place, suggesting that original growth may not have been sustainable. Industry analysts look at those one-dimensional numbers, and isolate the factor of piracy, without considering radical changes in music taste, genre, and consumption at a time when the market is globalizing and becoming more differentiated — that is, no more pop superstars, which is what the majors were built to handle.

So, let’s review things no one seems to want to talk about:

The industry is still huge and profitable, even if they’re not a great stock investment.

Online music sales may eclipse physical media in the long term, meaning all this Chicken Little nonsense is going to be meaningless.

Music consumption patterns are changing, which may have a deeper impact than piracy.

The real reason to be specific of a plan from one label isn’t that that label is evil — it’s that it may be starting an illogical, empty plan with no allies and no real practical implementation.

You really can’t assume the industry will act even in its own best interests.

Now, where’s the picture of a kitten that embodies that?

No, I think the one at the top pretty much sums it up.

Updated:Greg Smith points out that Canada has proposed similar taxation, which I suppose is analogous. And it’s even the same amount — $5, on ISPs. (Well, Canadian dollars, but still.)

Interesting to note, however:

The Canadian plan would be government-controlled. Warner apparently wants individual labels to organize the program.

The Canadian plan is being organized by songwriters and creators, not labels. That’s a big deal, as US labels would need buy-in from copyright holders.

I’m just not convinced this passes the laugh test, as far as plausibility is concerned — not with legal, paid downloads growing, and new signs that a subscription model may also take, plus progress on licensing fees.

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